China Eastern Airlines Corp. (670), the nation’s second-biggest carrier by passenger numbers, said profit fell 7.7 percent last year as fuel prices rose.
Net income dropped to 4.58 billion yuan ($727 million), from 4.96 billion yuan, the company said in a filing to the Hong Kong stock exchange today. That missed the 5.1 billion-yuan average of eight analyst estimates compiled by Bloomberg. Sales rose 12 percent.
The aviation industry in China in 2012 will “face significant pressures as a result of complex and changing domestic and international operating environments, significant cost increases and general downturn in the global aviation industry,” the carrier said in the statement.
China Eastern said it will tighten cost control, strengthen capital operations and diversify financing channels to meet the challenges. The Shanghai-based airline has abandoned an international expansion drive to focus on competing with China Southern Airlines Co. (1055) and Air China Ltd. (601111) in the domestic market.
China Eastern flew 68.7 million passengers last year, 5.8 percent more than a year earlier, the company said. Its passenger load factor, or the percentage of seats filled by paying customers, increased 0.9 percentage point to 78.9 percent.
Jet Fuel Prices
Fuel costs jumped 35 percent in the year because of higher prices and an increase in services. Jet kerosene prices averaged $125.6 a barrel in Singapore trading in 2011, 40 percent higher than the year before, according to data compiled by Bloomberg.
China Eastern fell 1.9 percent to close at HK$2.63 in Hong Kong trading on March 23. It’s declined 16 percent in the past year, compared with a 9 percent drop for the benchmark Hang Seng Index.
The carrier said its board didn’t recommend a dividend for last year.
Li Jiaxiang, director of China’s civil aviation regulator, said earlier this month that passenger growth will slow this year. The cooling of the Chinese economy and the European debt crisis are damping overseas travel demand, China Eastern Chairman Liu Shaoyong said earlier this month.
The carrier last year dropped an order for Boeing Co. (BA) 787 Dreamliners in favor of 45 smaller 737s because of delivery delays and slowing demand for long-haul international travel.
Chinese carriers flew a total of 292.2 million travelers in 2011, 9.2 percent more than a year earlier, according to the regulator’s data.
--Jasmine Wang and Victoria Ruan. Editors: Vipin V. Nair, Nathaniel Espino
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